Correlation Between Avonmore Capital and Newgen Software

Can any of the company-specific risk be diversified away by investing in both Avonmore Capital and Newgen Software at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Avonmore Capital and Newgen Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avonmore Capital Management and Newgen Software Technologies, you can compare the effects of market volatilities on Avonmore Capital and Newgen Software and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Avonmore Capital with a short position of Newgen Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avonmore Capital and Newgen Software.

Diversification Opportunities for Avonmore Capital and Newgen Software

0.27

Correlation Coefficient

Avonmore Capital  Newgen Software

Modest diversification

The 3 months correlation between Avonmore and Newgen is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Avonmore Capital Management and Newgen Software Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newgen Software Tech and Avonmore Capital is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Avonmore Capital Management are associated (or correlated) with Newgen Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newgen Software Tech has no effect on the direction of Avonmore Capital i.e., Avonmore Capital and Newgen Software go up and down completely randomly.

Pair Corralation between Avonmore Capital and Newgen Software

Assuming the 90 days trading horizon Avonmore Capital is expected to generate 4.79 times less return on investment than Newgen Software. But when comparing it to its historical volatility, Avonmore Capital Management is 1.2 times less risky than Newgen Software. It trades about 0.03 of its potential returns per unit of risk. Newgen Software Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  109,070  in Newgen Software Technologies on September 12, 2024 and sell it today you would earn a total of  33,005  from holding Newgen Software Technologies or generate 30.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Avonmore Capital Management  vs.  Newgen Software Technologies

Avonmore Capital Man

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avonmore Capital Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Avonmore Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Newgen Software Tech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Newgen Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avonmore Capital and Newgen Software

The main advantage of trading using opposite Avonmore Capital and Newgen Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avonmore Capital position performs unexpectedly, Newgen Software can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Newgen Software will offset losses from the drop in Newgen Software's long position.

The idea behind Avonmore Capital Management and Newgen Software Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.